Main Street: How Cell Phone Devices Beam Your Location and Identity To Retailers

By Juliette Fairley | Main Street

After buying 12 lattes with the Starbucks app on his smartphone, 26-year-old Jacob Donnelly is entitled to a free one. 

The New York-based product manager knows this, because the app flashes coupons whenever he uses it to pay for his expensive coffee habit.

“I’ve used those offers,” said Donnelly, who is now a gold member for his customer loyalty. “Starbucks is the only company I accept advertising from, because it allows me to accrue rewards for the money I spend.” 

But it's increasingly hard for him to avoid promotions even while on the move.  That's because Donnelly is among the 80 million Millennials in the U.S. who are mobile technology aficionados and thus prime targets for mobile promotions, according to Sito Mobile, a company that advertises through text messages. 

“Millennials are a bigger market segment, and that’s why advertisers target them,” said Jerry Hug, CEO of Sito Mobil. “Instead of looking at billboards or the television set, Millennials are interacting with their devices. That’s where the Millennial is engaged.” 

Millennials are attractive to marketers, because they spend $430 billion in discretionary income. That’s why Donnelly tries to avoid giving out his cell phone number when shopping at storefronts. 

“Text advertising is like having your mailbox stuffed with useless clothing catalogs from department stores like Macy’s,” Donnelly said. “Geo-targeted text advertising is O.K. when I am in the vicinity of a store, but it’s problematic to receive text advertisements when you’re not in the area.” 

The proliferation of smartphones has enabled an explosion in location- or geo-based mobile advertising. For consumers trying to rein in their spending, this presents a dangerous scenario: the temptation to spend tracks them down.  

An example of geo-based mobile advertising is when Toys "R" Us targeted Millennial moms on Black Friday after Thanksgiving last year over a two-week period leading up to Christmas Day. 

“We identified past visitors around day care centers, parks and playgrounds who were within a five mile radius of the retailer and texted them an incentive to shop at Toys 'R' US,” said Sito Mobile's Hug.

The customized text campaign resulted in 16,500 visitors between the ages of 18 and 34 years old who walked into a Toys "R" Us nationwide. 

“These women were walking, shopping, at the park when they received a banner ad from Toys 'R' Us while surfing the Internet on their smartphone,” Hug said. 

Mobile Momentum

Seven years ago, there was a 30% to 40% penetration of smartphone usage among Americans, compared to 85% today. 

“We started location-based mobile advertising a year ago, and we’ve seen that business double from a revenue standpoint,” Hug told MainStreet. “Retailers are just beginning to shift their budgets from radio and print to mobile text advertising.” 

Once cellular identity is beamed up to a cloud after the location services function is enabled on a smartphone, advertisers can promote their brands to mobile applications and websites. 

“We take privacy issues seriously,” Hug said. “The more a marketeer knows about consumers, the more relevant the advertising will be that is delivered.” 

Of course, it’s not just Millennials that brands pursue. 

“Pharmaceutical companies spend quite a bit of money on mobile text advertising to target the aging population,” said Hug.

But the allure of the Millennial dominates, given that some 30% of Millennials are mobile-only users.

“Millennials don’t have a landline whereas older generations still have both,” Hug said. Advertisers will increasing seek to make appearances on Millennials main screen -- that of their mobile device.